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Highlights
- At a time when the the global economy is dealing with the fallout of the pandemic, never has the determination of crypto’s impact on the wider economy been more important
- Just recently, the Russian media reported the Deputy Prime Minister, Dmitry Chernyshenko, had signed a roadmap to regulate crypto operations in Russia
- Australia is one of the more friendly destinations and believes its economy will benefit from crypto in the long run, provided there is proper regulation put in place
Many are saying crypto is currently in a bear market. To be fair, it’s hard to tell with crypto. The inherent volatility of digital assets means that the direction of the market can change very quickly.
Having said that, the crypto market has been in decline for close to three months now. Led by Bitcoin, which in November reached a new all-time high of US$68,500, the world’s largest crypto is now valued at US$37,992 – a drop of around 45%.
Meanwhile, countries around the world are grappling with the potential impact crypto will have on their wider economies. Some look upon this more favourably, while others see it as a threat to economic stability.
At a time when the the global economy is dealing with the fallout of the pandemic, which has caused lockdowns all over the world throughout the past two years, never has the determination of crypto’s impact on the wider economy been more important.
Russia’s blanket ban on cryptocurrency
Just recently the Russian media reported the Deputy Prime Minister, Dmitry Chernyshenko, had signed a roadmap to regulate crypto operations in Russia.
This followed a report by Russia's central bank, which proposed a blanket ban on crypto-related activity in the country.
The paper, titled Cryptocurrencies: Trends, Risks, and Regulation, argues the adoption of cryptocurrencies poses sizeable risks for the Russian financial market and particularly to the well-being of the Russian citizens, due to market volatility, scams and cyber attacks, which they believe will lead to a loss of investment in traditional assets.
Threat To Central Banks
Several countries have expressed their concerns regarding the threat posed to central banks by decentralised digital currencies.
China is another country, which throughout 2021, put a blanket ban on both the trading as well as mining of digital currencies.
Migration of Bitcoin Mining
Before China imposed a ban on crypto mining, the majority of the world’s Bitcoin occurred there. This meant that following the ban, miners were forced to find other venues to execute the mining of various crypto coins.
Those miners headed to places like Kazakhstan, where electricity is cheap. Bare in mind, the mining of Bitcoin alone has been reported to use as much electricity on an annual basis than smaller countries like Sweden, Malaysia and Egypt.
The migration of miners to Kazakhstan has put pressure on the nation’s power grid, causing regular power outages, resulting in authorities being forced to ration electricity away from crypto miners, which consequently has forced those miners to migrate again to more electronically fruitful locations.
This loss of economic activity has reportedly resulted in losses of around US$1.5 billion times Kazakhstan’s economy.
Policy and levels of regulation in Australia
Australia is one of the more friendly destinations and believes its economy will benefit from crypto in the long run, provided there is proper regulation put in place.
A report published in October by the Senate Select Committee on Australia proposes licenses for crypto exchanges as well as streamlined taxation legislation.
Australia has conveyed a relatively optimistic attitude to the future that decentralised digital currencies and blockchain technology can provide.
The Bottom Line
Cryptocurrency is still a relatively new asset class. Its popularity, which has accelerated its status to the point where governments are now scrambling to either incorporate or reject it from participating within their larger economies, is even more recent.
For those countries, like Australia, who have chosen to incorporate rather than reject crypto assets, its effect on the wider economy remains to be seen.
